The IMF has sounded a warning for Britain over its housing market and uncertainty surrounding future membership of the EU.

The UK economy is on the right track, but the uncertainty surrounding a referendum on Europe could cast a shadow on the country’s economic future, the International Monetary Fund said today.

Publishing its annual health-check of Britain, the IMF also expressed some concerns about rising house prices, housing shortage and the ‘strikingly large’ UK current account deficit.

It said this left the country exposed to a loss of confidence from foreign investors and high levels of household debt.

In: IMF managing director Christine Lagarde said she hoped the UK remained in the European Union

Christine Lagarde, the managing director of the IMF, said that in her personal view she 'very, very much' hoped that the UK would vote to remain in Europe and that a referendum should be held sooner rather than later.

As for housing, the IMF said that there was ‘clearly need for more’ and that the Bank of England might need to impose tougher checks on mortgage lending if the amount of higher-leverage mortgages do not continue to fall.

Lagarde said: ‘House prices are still growing faster and higher than income grows.

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‘In addition, while household debt has stabilised, it has stabilised at fairly high levels. That leaves small households vulnerable to income and interest rate shocks.’

David Cameron has promised to hold an in-out referendum by the end of 2017, but Lagarde hinted that a referendum should happen sooner rather than later to avoid uncertainty.

‘Certainty is always better than uncertainty, that's a commonplace statement on the part of the IMF.

‘But as an economist and in charge of doing forecasts, I'm trying to assess and model through the various hypotheticals, the more certainty we have, the better,’ she said.

EU referendum: David Cameron said a referendum will be held before the end of 2017

The IMF’s next report about the health of the UK economy to be published in May will examine in detail the risks in case of a ‘Brexit’.

The report could come just weeks before the referendum, if Cameron chooses to hold it in June as he is said to have considered. Currently, opinion polls show Britons are evenly divided on whether to remain in the 28-member block.

Despite these reservations, the IMF’s assessment on the UK economy was positive, as it stated that ‘the UK's recent economic performance has been strong, and considerable progress has been achieved in addressing underlying vulnerabilities’.

The UK economy, while having slowed down in the second half of this year, has outperformed all the rest of major world economies in the past couple of years.

The IMF suggested this ‘steady growth’ looked likely to continue over the next few years, averaging around 2 per cent in the medium term.

Housing warning: The IMF said house prices were still growing considerably faster than wages

Looking at the UK’s monetary policy, the IMF said the Bank of England should keep rates at their record low of 0.5 per cent until ‘inflationary pressures are clearer’.

It also said that the Government should abandon stamp duty in favour of a levy on property value.

‘Rebalancing taxation away from transactions and towards property values could boost mobility and facilitate more efficient use of the housing stock,’ the report said.

It also suggested reducing council tax discounts for single-occupant homes to 'increase the utilisation' of these properties.

Lagarde also backed the Chancellor's plans to reduce the deficit and reach a surplus by 2020, although that depended on whether the UK economy continued to grow at the current pace.

‘The fiscal deficit has been more than halved over the past five years, but both it and the public debt remain high,’ she said.

Chancellor George Osborne said that overall the report was the most positive since he became Chancellor in 2010. ‘They say that our economy is much stronger, more resilient and has more jobs,’ he said.